Vietnam Market Watch: Free Trade Areas, Growth Projections, and Vietnam’s Emergence as a Japanese Export Base

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Government Plans to Create Free Trade Areas with 55 Partners

Vietnamese Prime Minister Nguyen Xuan Phuc announced that Vietnam would create a Free Trade Area (FTA) with 55 partners during the 17th Asian Banker Summit in Hanoi. The 55 partners will include all G7 members states and 15 members from the G20 group. The FTA will be operational from 2016 until at least 2020. Phuc, who was addressing more than 1,000 investors, said that Vietnam would also undertake significant administrative reform to boost competitiveness and enhance the business environment. 

The FTA aims to create a sustainable financial community in the ASEAN markets and to attract investors into Vietnam. The agreement comes in the wake of several other FTAs signed by neighboring countries in recent months. Vietnam wants to keep pace with other ASEAN countries and ensure that the country enjoys sustainable development through expanding regional trade.

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Economy Set to Grow by 6.17 Percent in Second Quarter

The Central Institute for Economic Management (CIEM) projects that Vietnam will grow by 6.17 percent in the second quarter of 2016 (Q2), while the inflation rate will be 0.73 percent. Meanwhile, exports are forecast to grow at a rate of 8.02 percent in Q2. The trade deficit for this period is expected to be US$ 420 million.

Economic analysts suggest that Vietnam should implement regulations on trade liberalization in order achieve the predicted growth rates. In this regard, a number of analysts have called for the implementation of the Investment Law and Enterprise Law, which will clarify regulations on trade liberalization and settle inconsistencies in the Investment Law, which guides transactions on land, environment, construction, and real estate.  

The growth numbers projected by the CIEM bode well for investors who plan to invest in Vietnam. However, investors should also take cognizance of the reforms suggested by economists, as the effective implementation of these reforms may be vital for ensuring stable growth.

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Japanese Manufacturers Keen to Use Vietnam as an Export Base

An independent survey conducted by the Mizuho Research Institute in Japan states that Japanese manufacturers are keen to use Vietnam as an export base for textiles and other products. The development was preceded by Vietnam signing the Trans Pacific Partnership (TPP), which is expected to ease export-import restrictions in Vietnam.

Around 43.8 percent of the respondents of the survey stated that they wish to invest in ASEAN countries. Among the ASEAN countries, nearly 53.5 percent of the respondents wished to focus on Vietnam. This marks a 4.9 percent increase when compared to figures from the previous survey conducted in 2015. Among the signatories to the TPP, 12.8 percent of the respondents earmarked Vietnam for expanding investments.

The survey is clearly reflective of the preference that foreign investors are developing for Vietnam. Agreements such as the TPP are further expected to boost Vietnam’s ability to attract investments. Trade analysts believe that the easing of export-import restrictions will also contribute significantly to Vietnam’s economic growth in the coming months.


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